The US Dollar (USD) extended downside movement against the Canadian Dollar (CAD) on Friday, dragging the price of USD/CAD to less than 1.0915 following the release of Bank of Canada (BoC) inflation reports. The bias however remains bullish due to Higher High and Higher Low in the recent wave.
As of this writing, the pair is being traded around 1.0913. A support may be seen near the current level, the confluence of 38.2% fib level and 200-Day Simple Moving Average (SMA) and then 1.0858, the confluence of 50% fib level and 100-Day SMA as demonstrated in the following chart.
On the upside, the pair is expected to face a hurdle near 1.0980, the intraday high of today ahead of 1.1000, the psychological level and then 1.1100, the swing high of the recent upside rally and psychological number. The bias will remain bullish as far as the 1.0810 support area is intact.
The Consumer Price Index (CPI)—a main gauge for inflation—remained 2.1% in August as compared to the same month of the year before, a report by Statistics Canada revealed on Friday, meeting the average forecast of different economists surveyed by Bloomberg. Generally speaking, higher inflation is considered positive for the economy thus a pause in the inflation rise was taken negative by the investors, spurring selling pressure in the price of USD/CAD.
The wholesale sales in Canada declined unexpectedly by 0.3% in July as compared to 0.8% increase in the month before, missing the median projection of 0.6% increase, a government report revealed today. A worse than expected actual reading increased the ongoing selling pressure in the price of USD/CAD.
Considering the overall technical and fundamental outlook, selling the pair around the current levels appears to be a good strategy, keeping a tight stop at 1.0980 as described above.